Buying an Existing Business
Buying an existing business is indeed a dangerous thing. The chances of finding a truly
promising business for sale are small. Most such businesses are never sold, or, if they are
sold, are kept in the family. Justifications for selling a business like “owner retiring” or
“illness in the family” are often excuses to get rid of an unprofitable business. Business
information is very easily distorted. You should always verify information received
through business information agencies and conduct further financial analysis before making the purchase.

Protect Yourself. When investigating a business opportunity of any kind, you should
follow two basic rules of thumb. The first is to do very rigorous financial analysis of the
potential opportunity. Compare the investment required to buy the business to the investment
required to start a business from scratch. In most cases you'd do better starting your own
business. Remember, there is an “opportunity cost” to money, the amount you could have
made if you had invested it elsewhere.

Be Skeptical. The second rule is that there is no such thing as a business opportunity
“too good to pass up.” In America, there will always be another opportunity. If someone tries
to sell you something by telling you the opportunity will be limited, see this as the sales
technique it is. Think carefully. Don't let anyone else do your thinking for you.

How it Works Best. Buying an existing business can work for an aggressive
entrepreneur who has some expertise in turning around failing businesses. There are
sophisticated techniques for “finding” assets in businesses in trouble and then turning them
around. In general, though, buying a business is the solution only for someone who wants a
steady income but not much more. The real entrepreneur, unless he or she has the special
skills to turn around a troubled business, would do much better starting a new business.